Managing and storing stock effectively is important for a business in order to maintain production and sales.
What is stock?
Stock is any item stored by a business for use in production or sales. Stock can be:
- Raw materials and components waiting to be used in the manufacturing process, eg tyres stored by a car factory.
- Finished goods held in store so that a customer order can quickly be met from stock.
Holding stock incurs warehouse storage costs and ties up working capital. Funds must be found to pay for materials, components and unsold goods with interest.
Running out of one item of stock could bring the whole factory to a halt. Staff must still be paid even though they do not have the parts to carry on production.
Stock control aims to hold sufficient items on site to enable production while minimising stock holding costs. There are two methods…